International Shale Development Challenges & Opportunities: Argentina October 21, 2015 Chuck Whisman, Global Energy Market Director, CH2M Charles.Whisman@ch2m.com
Discussion Overview Review History of Oil & Gas Industry in Argentina & Nationalization Detail Unconventional Shale Development Opportunities in Argentina Discuss Risks/Challenges in Argentina
Why Argentina? Large volume of recoverable oil & gas Long history of oil & gas exploration & production Government interest and support Existing industrial/petrochemical markets Existing pipelines Ease to add infrastructure (pipelines, separation/processing facilities, ) ROI government incentives for unconventional development 3
Upstream Oil & Gas Impact Significant growth in many markets: O&G Exploration & Production Pipelines Compression, Storage, & Processing Power Petrochemicals & Refining Exporting & Shipping 4
Worldwide Recoverable Shale-Gas Reserves Argentina World-class potential According to EIA, Argentina ranks 4th in shale oil reserves at 27 billion barrels, and second in shale gas with 802 trillion cubic feet. The report focused on 41 countries, 96 sedimentary basins, and 137 tight shale formations. For the last two years, Argentina has drilled more than 270 unconventional wells. 5
Argentina 2 nd Highest in Unconventional Wells Drilled 6
The History of O&G in Argentina In 1907, oil was discovered by accident along the Patagonian coast by Afrikaner immigrants (who were drilling for water), who settled there just after the Boer War ended in South Africa. The Boers were moved elsewhere and the government took over the oil. In 1922, the government established a company called YacimientosPetroliferosFiscales, or YPF, as the world s first state-run oil company, which subsequently served as a model for nationalization in other Latin American countries. Drilling contracts with foreign companies enabled YPF to increase production from five million barrels in 1934 to 109 million barrels in 1998, roughly three-fourths of total Argentine production. Madrid-based RepsolS.A. paid $15 billion for YPF in 1999 (Repsol-YPF.) In 2014, following arbitration by the World Bank, Argentina nationalized YPF paying Repsol$5 billion for the share nationalized. The federal government subsequently agreed to share ownership of YPF with the provincial governments. 7
YPF Continues to be the Leader in Argentina O&G and Petrochemical companies are investing billions of $ in Argentina (DOW, Chevron, Shell, PETRONAS, ). YPF, the largest shale operator in the country, reported production in April 2015 of 22,900 barrels per day (b/d) of oil and 67 million cubic feet per day (MMcf/d) of natural gas from three joint ventures in VacaMuerta: one with Chevron at the Loma Campanafield, one with Dow Chemical at the El Orejanofield, One venture with Petronas at La Amarga Chica field In addition, China's national oil company Sinopec and Russia's national oil company Gazprom have recently signed a memorandum of understanding with YPF to jointly develop shale from the same basin. In Oct. 2015, YPF increased their forecast projections after better than expected results. Plan to produce 50% of it s NG from unconventional shale by 2020 (15% currently). 8
Argentina Shale Gas Estimates by Basin 9
Environmental Aspects/Concerns Overall environmental impact Water sourcing/use/availability Waste management & disposal Spill prevention Air quality Seismic activity Supply of materials Data management Social and community affairs 10
Pipeline & Downstream Infrastructure 11
Midstream Development in Vaca Muerta 12
Vaca Muerta (Neuquen) Basin 13
Vaca Muerta 2014 and 2015 14
Loma Campana 15
El Orejano and Rincon del Mangrullo 16
Environmental Aspects/Concerns Overall environmental impact Water sourcing/use/availability Waste management & disposal Spill prevention Air quality Seismic activity Supply of materials Data management Social and community affairs 17
Lessons Learned w/ US Shale is Helping Manage Risks Best Practices Risk Reduction Strategies and Programs Ecological Data Management Water Management Waste Management (inc. NORM) Spill Containment and Response Methane Monitoring (stray gas, well pad, compressions, pipelines) Social & Economical Impacts Remote Monitoring/Sensing Air Induced Seismicity Restoration HSSE This allows us to perform very efficient due diligence and risk reduction, regardless of regulatory framework. -We moved fast - We developed best practices - We responded to regulatory changes -We performed R&D - We involved our best scientists - We developed programmatic solutions 18
Educational, R&D, and Scientific Advisory Work Industry groups and associations State and shale-specific oil & gas organizations (COGA, PIOGA, MSC, ) Collaboration among universities, O&G companies, consultants, NGOs Regulatory & legislative interaction discuss needs, best practices, science Community outreach and education 19
International Shale Development Challenges & Opportunities: Argentina October 21, 2015 Chuck Whisman, Global Energy Market Director, CH2M Charles.Whisman@ch2m.com